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U.S. Seizes Control of AIG With $85 Billion Emergency Loan

Global stocks have experienced wild fluctuations this week in the wake of the U.S. government's seizure of insurance giant American International Group, the failure of Lehman Brothers, the disappearance of Merrill Lynch as an independent company and reports the U.S. government will set up a government entity to take on bad debts from financial institutions.

In a sign of the tensions at AIG, former chief executive Maurice R. "Hank" Greenberg -- whose 11 percent ownership of AIG has lost billions of dollars in recent weeks -- sent a scathing letter to Willumstad. "Despite repeated assurances from management and the company that everything was under control, it is now clear that nothing was under control," he wrote. "Since you became Chairman of AIG, you and the Board have presided over the virtual destruction of shareholder value built up over 35 years."

The negotiations over AIG yesterday overshadowed some good news for investors.

In addition to the uptick in the stock markets, oil prices took another tumble, closing at $91.15 a barrel as declining demand and the overall economic turmoil continued to pull down prices. Also, consumer prices fell 0.1 percent in August, led by a 3.1 percent decline in energy prices, according to figures released by the Labor Department.

It was the first monthly decline in consumer prices since October 2006 and could be a good future indicator, Kenneth Beauchemin, an U.S. economist for Global Insight, said in a research note yesterday. "With fuel prices remaining subdued into September, we can look forward to another tame consumer price report next month, with perhaps more to follow," he said.

Meanwhile, the two remaining independent investment-banking firms -- Goldman Sachs and Morgan Stanley -- yesterday reported profits that beat analysts' expectations. Goldman reported a 70 percent drop in third-quarter profit but still earned $845 million. Morgan Stanley's profit fell 3 percent, to $1.43 billion.

One day after Lehman Brothers filed for bankruptcy, it began yesterday to sell off parts of the company. The British bank Barclays, which had been a leading contender to acquire Lehman this weekend before walking away, said it had agreed to buy Lehman Brothers North American investment-banking and capital-markets businesses for $250 million. Barclays said it would also pay $1.5 billion for Lehman's New York headquarters and two data centers in New Jersey.

Staff writers Binyamin Appelbaum, David Cho, Neil Irwin and Lori Montgomery contributed to this report, along with news researcher Lucy Shackelford and special correspondent Heather Landy in New York.


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